Earlier this week, Walla Walla Valley stalwart Woodward Canyon announced that winemaker Kevin Mott and sales director Thomas Woodley have become shareholders in the winery. This creates an ownership group of Rick Small and Darcey Fugman-Small; their adult children Jordan Dunn-Small and Sager Small; and now Mott and Woodley.

In announcing the change, Rick Small stated, “As we worked through succession planning, it became clear that Kevin and Thomas are integral to the operation of Woodward Canyon and to its future.” Mott and Woodley both joined the winery in 2003.The Smalls will continue day-to-day management. Indeed, for anyone who has met the irrepressibly energetic Rick Small, it is clear that he is as passionate about grape growing and winemaking as ever (read a previous post on Woodward Canyon here). While this change therefore has no immediate external impact, it does have long-term implications for Woodward Canyon – one of Washington’s oldest and most storied wineries.

Elsewhere in the state, eyebrows raised last month when word that Cave B Inn and Spa in George, Washington were being put up for auction (see listing here). This facility, adjacent to Cave B Estate Winery, is one of the more majestic in the state, overlooking the Columbia River near the scenic Gorge Amphitheatre.

After speculation that the auction might be a distress sale, the winery wrote on its Facebook page, “This planned and voluntary sale event is part of the Bryan family's succession planning….We want to assure you that Cave B Estate Winery, and our winemaker Freddy Arredondo and other Bryan family members will continue to make available premium Cave B wines before and after this sale event for the foreseeable future.”

Speaking with Arredondo at the Washington Association of Wine Grape Growers annual meeting earlier this month, he stated that the Bryan family has been looking to sell the inn and spa in recent years. Not having found a suitable buyer to date, they decided an auction was the best way to move forward with the sale. “We’re all excited about it,” Arredondo, who is the Bryans’ son-in-law, said of the sale.

While the auction focuses on the inn and spa, it does include parcel options for the winery and vineyards in case the buyer wants to purchase the entire site. However, Arredondo stated that even if these parcels were sold, the brand and inventory would not be. The auction will take place March 15th.

Prior to these announcements, succession planning most recently came to the fore in Washington after the sale of Betz Family Winery last spring (Read a Focus Report on the new owners of the winery, Steve and Bridgit Griessel, here). What will succession planning look like for Washington’s numerous small, family wineries? Read some thoughts posted after the Betz sale here.

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This is just the tip of the iceberg. Looking at U.S. wine industry growth over the past three decades, you can see how many small, family-owned boutique wineries (probably numbering in the thousands) were started by people in their 20s, 30s and 40s. Those people are now in their 50s, 60s and 70s. What if the kids don't want the business? Or if there are no kids? Unlike Europe, where traditions and family duties still carry a great deal of weight, here it's every man and woman for him/her self. Dealing with the issue of succession is probably going to be the most difficult challenge facing the greatest number of people in the wine industry for the next decade or more.

Paul, I could not agree more, and I believe that succession will be a particular issue for Washington in the years to come. With the vast majority of wineries producing less than 5,000 cases annually, started in the last ten years, and with often limited brand awareness outside of the Pacific Northwest, the question will be, what exactly is there to sell when the time comes?

In the last ten years, the explosive growth of the industry has been driven by people coming to the area with many entering the industry as a second or third career. Will there be a similar wave of people interested in coming in and taking over other people's wineries in the years to come when this wave looks to retire? Will these people's children be interested in taking over these businesses?

Washington has been founded upon small, family wineries where the individuals behind the winery are often an important part of the brand equity. While a critical part of the industry, this is, of course, not transferable. What will this mean when it comes time to transfer ownership of the winery?

To answer this question, I always come back to something that Bob Betz said about the sale of his winery - that quality of the wine is paramount. Everything in terms of the winery's brand builds on this. While Bob Betz has tremendous regional and even national brand equity as a person, the quality of the wine at Betz Family Winery has transcended this and allowed for what I would think was a fairly lucrative sale for the family. How many Washington wineries are in a similar position right now or will be when it comes time for succession? The number right now the number is a lot smaller than it needs to be if the industry is to continue to grow and thrive in the years to come. It will be very interesting to watch.

The sale of Betz was unique in many ways, but I would argue that the jury is out concerning the longterm viability of the brand's reputation. For five years, Bob Betz remains in charge of the winemaking. That certainly had to be of massive importance to the new owners. Where will the brand be in 10 years? We'll have to wait and see. And, as you say, without the built-in reputation and brand collateral that Betz had going into the sale, things only get a lot tougher for those grappling with succession issues.

It’s true that most small wineries aren’t thinking of exit planning – a subject I’ve been raising with many owners over the last several years. Even if I get conversations started as a result of personal contact or the newsletters I’ve been publishing, only a few have pursued the effort seriously. To try and fix this dis-connect I interviewed eight Washington wine industry leaders who have been through ownership transitions to garner success stories as encouragement and inspiration. I’ve been rolling out their observations and experiences in recent newsletters and will continue in the coming months.

The big lesson in exit planning is that it takes a great deal of time – three to five years – to work through all the issues and put everything in place. Yes, the wine has to be of excellent quality, but the business has to be sound as well – whether it is to be sold to a third party or transferred to the next generation.